Estimate the effective cost of the commercial paper

Assignment Help Financial Management

Reference no: EM13943017

Ralph, treasurer for M and M Products, Inc., recently updated his firm’s short-term cash forecast only to discover that the firm will suffer a cash shortage of $15 million for a period of 30 days. One alternative is to liquidate a portion of his marketable securities portfolio but with interest rates up, this is not a good alternative. Ralph just learned from one of his commercial paper dealers that paper in the thirty-day range is in demand and that asked discount rates are comparably good at about 3.7%. The dealer’s annual fee is 10 basis points and the annual commitment fee on a back up line of credit is 25 basis points.

Estimate the effective cost of the commercial paper assuming that this is the only commercial paper issue planned for the year.

Estimate the effective cost of the commercial paper assuming that there will be recurring issues of commercial paper all year long.

Reference no: EM13943017

Questions Cloud

What should you know about website privacy : Deleting items never really gets rid of them. After reading this week's course materials, describe what Internet users should know about one of the following topics: What should you know about website privacy?

Momentum fluxes for creeping flow : Momentum fluxes for creeping flow into a slot (Fig. 3.B-7). An incompressible Newtonian liquid is flowing very slowly into a thin slot of thickness 2B (in the y direction) and width W (in the z direction)

Define nigrescence : Define Nigrescence, Who are the theorists and what are the stages

What is the average level of the companys free trade credit : A firm purchases $4,562,500 in goods over a 1 year period from its sole supplier. The supplier offers trade credit under the following terms: 2/15, net 50 days. Davis finally chooses to pay on time (pay in the 50th day) but not to take the discount. ..

Estimate the effective cost of the commercial paper : Ralph, treasurer for M and M Products, Inc., recently updated his firm’s short-term cash forecast only to discover that the firm will suffer a cash shortage of $15 million for a period of 30 days. One alternative is to liquidate a portion of his mark..

Define what is meant by power efficiency : Order the following modulation types in terms of spectral efficiency (best to worse) and explain why (be specific, show a number and how you got it): 64-QAM, QPSK, 8-PSK, and BPSK. Assume that the r=0, perfect filtering.

Supplier offers terms-what is the discount being offered : You place an order for 2,100 units of Good X at a unit price of $58. The supplier offers terms of 1/30, net 35. What is the discount being offered? How quickly must you pay to get the discount? If you do take the discount, how much should you remit?

Estimate the cost of credit line : You recently approached your bank about establishing a credit line facility. The terms offered by your bank include a nominal rate of prime + 1.5% (prime is currently 5%) on the amount borrowed, a commitment fee of 25 basis points on the unused porti..

Consider a demand-paging system : Consider a demand-paging system with the following time-measured utilizations

User Account

All Pages